NEW YORK--(BUSINESS WIRE)--
Annaly Capital Management, Inc. (NYSE: NLY) today reported Core Earnings
for the quarter ended June 30, 2009, of $364.5 million or $0.66 per
average share available to common shareholders as compared to Core
Earnings of $305.2 million or $0.60 per average share available to
common shareholders for the quarter ended June 30, 2008, and Core
Earnings of $309.3 million or $0.56 per average share available to
common shareholders for the quarter ended March 31, 2009. "Core
Earnings" represents a non-GAAP measure and is defined as net income
(loss) excluding impairment losses, gains or losses on sales of
securities and termination of interest rate swaps and unrealized gains
or losses on interest rate swaps. On a GAAP basis, net income for the
quarter ended June 30, 2009, was $597.1 million or $1.09 per average
share available to common shareholders, as compared to net income of
$308.0 million or $0.60 per average share available to common
shareholders for the quarter ended June 30, 2008, and net income of
$349.9 million or $0.64 per average share related to common shareholders
for the quarter ended March 31, 2009.
During the quarter ended June 30, 2009, the Company sold $524.2 million
of Mortgage-Backed Securities, resulting in a realized gain of $2.4
million. During the quarter ended June 30, 2008, the Company sold $2.1
billion of Mortgage-Backed Securities, resulting in a realized gain of
$2.8 million. During the quarter ended March 31, 2009, the Company sold
$835.7 million of Mortgage-Backed Securities, resulting in a realized
gain of $5.0 million.
Common dividends declared for the quarter ended June 30, 2009, were
$0.60 per share, as compared to $0.55 per share for the quarter ended
June 30, 2008, and $0.50 per share for the quarter ended March 31, 2009.
The annualized dividend yield on the Company's common stock for the
quarter ended June 30, 2009, based on the June 30, 2009 closing price of
$15.14, was 15.85%. On a Core Earnings basis, the Company provided an
annualized return on average equity of 17.20% for the quarter ended June
30, 2009, as compared to 17.88% for the quarter ended June 30, 2008 and
15.96% for the quarter ended March 31, 2009. On a GAAP basis, the
Company provided an annualized return on average equity of 28.17% for
the quarter ended June 30, 2009, as compared to an annualized return on
average equity of 18.04% for the quarter ended June 30, 2008, and an
annualized return on average equity of 18.06% for the quarter ended
March 31, 2009.
Michael A.J. Farrell, Chairman, Chief Executive Officer and President of
Annaly, commented on the Company's results. "I'm pleased that we
continue to deliver strong risk-adjusted returns for our shareholders
while maintaining a prudent approach to portfolio management. Even
though we expect the currently favorable operating conditions to persist
for some time, we will continue to vigilantly monitor the many policy
and economic cross-currents that can affect our returns."
For the quarter ended June 30, 2009, the annualized yield on average
earning assets was 5.04% and the annualized cost of funds on the average
repurchase balance was 2.57%, which resulted in an average interest rate
spread of 2.47%. This is a 48 basis point increase over the 1.99%
annualized interest rate spread for the quarter ended June 30, 2008, and
a 36 basis point increase over the 2.11% annualized interest rate spread
for the quarter ended March 31, 2009. At June 30, 2009, the weighted
average yield on assets was 4.67% and the weighted average cost of
funds, including the effect of interest rate swaps, was 2.54%, which
resulted in an interest rate spread of 2.13%. Leverage at June 30, 2009,
was 5.9:1 compared to 7.1:1 at June 30, 2008, and 6.0:1 at March 31,
2009.
Fixed-rate securities comprised 69% of the Company's portfolio at June
30, 2009. The balance of the portfolio was comprised of 25%
adjustable-rate mortgages and 6% LIBOR floating-rate collateralized
mortgage obligations. At June 30, 2009, the Company had entered into
interest rate swaps with a notional amount of $19.8 billion, or 31% of
the portfolio. The purpose of the swaps is to mitigate the risk of
rising interest rates that affect the Company's cost of funds. Since the
Company receives a floating rate on the notional amount of the swaps,
the effect of the swaps is to lock in a spread relative to the cost of
financing. As of June 30, 2009, all of the Company's Investment
Securities were Fannie Mae, Freddie Mac and Ginnie Mae mortgage-backed
securities, which carry an actual or implied "AAA" rating.
"Investment opportunities for new capital remain attractive in the
current environment," said Wellington Denahan-Norris, Annaly's Vice
Chairman, Chief Investment Officer and Chief Operating Officer. "The
yield curve steepened during the quarter, and prepayment speeds continue
to come in slower than market expectations. Mortgage rates trended up
during the quarter, which should serve to further dampen refinancing
activity going forward. Our swap book, which provides the bulk of the
floating rate exposure in our portfolio, continues to roll into lower
rates and thereby lower our cost of funds. After taking into account the
effect of interest rate swaps, at June 30, 2009, our portfolio of
Investment Securities was comprised of 37% floating-rate, 25%
adjustable-rate and 38% fixed-rate assets."
The following table summarizes portfolio information for the Company:
June 30, June 30, March 31,
2009 2008 2009
Leverage at period-end 5.9:1 7.1:1 6.0:1
Fixed-rate investment securities as a percentage 69% 69% 66%
of portfolio
Adjustable-rate investment securities as a 25% 23% 27%
percentage of portfolio
Floating-rate investment securities as a 6% 8% 7%
percentage of portfolio
Notional amount of interest rate swaps as a 31% 30% 31%
percentage of portfolio
Annualized yield on average earning assets during 5.04% 5.50% 5.23%
the quarter
Annualized cost of funds on average repurchase 2.57% 3.51% 3.12%
balance during the quarter
Annualized interest rate spread during the 2.47% 1.99% 2.11%
quarter
Weighted average yield on assets at period-end 4.67% 5.27% 4.86%
Weighted average cost of funds at period-end 2.54% 3.40% 2.78%
Interest rate spread at period-end 2.13% 1.87% 2.08%
Weighted average receive rate on interest rate 0.38% 2.47% 0.55%
swaps at period-end
Weighted average pay rate on interest rate swaps 4.20% 4.78% 4.55%
at period-end
The Constant Prepayment Rate was 19% during the second quarter of 2009,
as compared to 16% during the second quarter of 2008, and 16% during the
first quarter of 2009. The weighted average cost basis of the Company's
Investment Securities was 101.6 at June 30, 2009. The net amortization
of premiums and accretion of discounts on Investment Securities for the
quarters ended June 30, 2009, June 30, 2008, and March 31, 2009, was
$58.4 million, $26.6 million, and $41.0 million, respectively. The total
net premium remaining unamortized at June 30, 2009, June 30, 2008, and
March 31, 2009, was $924.9 million, $500.7 million, and $668.3 million,
respectively.
General and administrative expenses as a percentage of average assets
were 0.19%, 0.18% and 0.20% for the quarters ended June 30, 2009, June
30, 2008, and March 31, 2009, respectively. At June 30, 2009, June 30,
2008, and March 31, 2009, the Company had a common stock book value per
share of $15.60, $13.03 and $14.67, respectively.
At June 30, 2009, Annaly's wholly-owned registered investment advisors
had under management approximately $9.9 billion in net assets and $19.0
billion in gross assets, as compared to $2.7 billion in net assets and
$11.8 billion in gross assets at June 30, 2008 and $8.5 billion in net
assets and $16.3 billion in gross assets at March 31, 2009. For the
quarter ended June 30, 2009, the investment advisors earned investment
advisory and service fees, net of fees paid to distributors, of $11.3
million, as compared to $6.0 million for the quarter ended June 30, 2008
and $7.3 million for the quarter ended March 31, 2009.
Annaly manages assets on behalf of institutional and individual
investors worldwide. The Company's principal business objective is to
generate net income for distribution to investors from its Investment
Securities and from dividends it receives from its subsidiaries. Annaly
is a Maryland corporation that has elected to be taxed as a real estate
investment trust ("REIT"), and currently has 544,357,410 shares of
common stock outstanding.
The Company will hold the second quarter 2009 earnings conference call
on July 30, 2009 at 10:00 a.m. EST. The number to call is 800-322-2803
for domestic calls and 617-614-4925 for international calls and the pass
code is 30518899. The replay number is 888-286-8010 for domestic calls
and 617-801-6888 for international calls and the pass code is 67731924.
The replay is available for 48 hours after the earnings call. There will
be a web cast of the call on www.annaly.com.
If you would like to be added to the e-mail distribution list, please
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This news release and our public documents to which we refer contain or
incorporate by reference certain forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended.
Forward-looking statements which are based on various assumptions (some
of which are beyond our control) may be identified by reference to a
future period or periods or by the use of forward-looking terminology,
such as "may," "will," "believe," "expect," "anticipate," "continue," or
similar terms or variations on those terms or the negative of those
terms. Actual results could differ materially from those set forth in
forward-looking statements due to a variety of factors, including, but
not limited to, changes in interest rates, changes in the yield curve,
changes in prepayment rates, the availability of mortgage-backed
securities for purchase, the availability of financing and, if
available, the terms of any financing, changes in the market value of
our assets, changes in business conditions and the general economy,
changes in government regulations affecting our business, our ability to
maintain our qualification as a REIT for federal income tax purposes,
risks associated with the broker-dealer business of our subsidiary, and
risks associated with the investment advisory business of our
subsidiaries, including the removal by clients of assets they manage,
their regulatory requirements and competition in the investment advisory
business. For a discussion of the risks and uncertainties which could
cause actual results to differ from those contained in the
forward-looking statements, see "Risk Factors" in our most recent Annual
Report on Form 10-K and any subsequent Quarterly Reports on Form 10-Q.
We do not undertake, and specifically disclaim any obligation, to
publicly release the result of any revisions which may be made to any
forward-looking statements to reflect the occurrence of anticipated or
unanticipated events or circumstances after the date of such statements.
ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(dollars in thousands)
June 30, March 31, September 30, June 30,
December 31,
2009 2009 2008 2008
2008(1)
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
ASSETS
Cash and cash $ 1,352,798 $ 1,035,118 $ 909,353 $ 1,083,814 $ 1,462,737
equivalents
Reverse repurchase
agreements with 170,916 452,480 562,119 619,657 49,964
affiliate
Mortgage-Backed
Securities, at 65,165,126 58,785,456 55,046,995 54,840,928 58,017,305
fair value
Agency debentures, 616,893 - 598,945 618,352 731,995
at fair value
Available-for-sale
equity securities, 156,990 51,418 52,795 22,490 32,631
at fair value
Trading
securities, at - - - 2,199 23,478
fair value
Receivable for
Investment 412,214 33,009 75,546 2,446,342 824,308
Securities sold
Accrued interest
and dividends 313,772 291,347 282,532 295,925 303,228
receivable
Receivable from 16,886 16,886 16,886 - -
Prime Broker(2)
Receivable for
advisory and 10,039 6,507 6,103 3,581 4,703
service fees
Intangible for
customer 11,091 11,399 12,380 6,726 7,604
relationships
Goodwill 27,917 27,917 27,917 22,966 22,966
Interest rate
swaps, at fair 7,267 - - - -
value
Other assets 5,346 5,717 6,044 2,602 3,216
Total assets $68,267,255 $60,717,254 $57,597,615 $59,965,582 $61,484,135
LIABILITIES AND
STOCKHOLDERS'
EQUITY
Liabilities:
Repurchase $51,326,930 $48,951,178 $46,674,885 $51,075,758 $51,839,663
agreements
Payable for
Investment 7,017,444 2,121,670 2,062,030 839,235 1,405,109
Securities
purchased
Trading securities
sold, not yet - - - 30,903 48,718
purchased, at fair
value
Accrued interest 102,662 112,457 199,985 168,361 154,615
payable
Dividends payable 326,612 272,170 270,736 296,254 296,201
Accounts payable
and other 40,115 23,970 8,380 26,385 36,625
liabilities
Interest rate
swaps, at fair 722,700 1,012,574 1,102,285 384,258 400,998
value
Total liabilities 59,536,463 52,494,019 50,318,301 52,821,154 54,181,929
6.00% Series B
Cumulative
Convertible
Preferred Stock:
4,600,000 shares
authorized,
2,604,814, 63,118 63,185 96,042 108,957 108,957
2,607,564,
3,963,525,
4,496,525, and
4,496,525 shares
issued and
outstanding,
respectively
Stockholders'
Equity:
7.875% Series A
Cumulative
Redeemable
Preferred Stock:
7,412,500 177,088 177,088 177,088 177,088 177,088
authorized,
7,412,500 shares
issued and
outstanding
Common stock, par
value $.01 per
share, 987,987,500
authorized,
544,353,997,
544,339,785, 5,444 5,443 5,415 5,402 5,385
541,475,366,
540,189,101, and
538,546,666,
issued and
outstanding,
respectively
Additional paid-in 7,668,988 7,667,769 7,633,438 7,616,528 7,592,161
capital
Accumulated other
comprehensive 1,362,134 1,121,551 252,230 (661,498 ) (478,791 )
income (loss)
Accumulated (545,980 ) (811,801 ) (884,899 ) (102,049 ) (102,594 )
deficit
Total
stockholders' 8,667,674 8,160,050 7,183,272 7,035,471 7,193,249
equity
Total liabilities,
Series B
cumulative
$68,267,255 $60,717,254 $57,597,615 $59,965,582 $61,484,135
convertible
preferred stock
and stockholders'
equity
(1) Derived from the audited consolidated financial statements at December 31,
2008.
The Company invested $45,000,000 in an equity fund and has redeemed
$56,000,000. Net unrealized gains in the fund valued at September 15, 2008
(2) still remain at the prime broker, Lehman Brothers International (Europe),
which is in bankruptcy and the ultimate recovery of such amount remains
uncertain.
ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
(dollars in thousands, except per share data)
For the quarters ended
June 30, March 31, December 31, September 30, June 30,
2009 2009 2008 2008 2008
Interest income $710,401 $716,015 $740,282 $810,659 $773,359
Interest expense 322,596 378,625 450,805 458,250 442,251
Net interest income 387,805 337,390 289,477 352,409 331,108
Other income (loss)
Investment advisory 11,736 7,761 7,224 7,663 6,406
and service fees
Gain (loss)on sale of
Mortgage-Backed 2,364 5,023 (468 ) (1,066 ) 2,830
Securities
(Loss)income from - - (2,010 ) 7,671 2,180
trading securities
Dividend income from
available-for-sale 3,221 918 612 580 580
equity securities
Loss on
other-than-temporarily - - - (31,834 ) -
impaired securities(1)
Unrealized gain (loss)
on interest rate swaps 230,207 35,545 (768,268 ) - -
(2)
Total other income 247,528 49,247 (762,910 ) (16,986 ) 11,996
(loss)
Expenses
Distribution fees 432 428 287 299 370
General and
administrative 30,046 29,882 26,957 25,455 27,215
expenses
Total expenses 30,478 30,310 27,244 25,754 27,585
Income (loss) before 604,855 356,327 (500,677 ) 309,669 315,519
income taxes
Income taxes 7,801 6,434 6,302 7,538 7,527
Net income 597,054 349,893 (506,979 ) 302,131 307,992
Dividends on preferred 4,625 4,626 5,135 5,335 5,334
stock
Net income (loss)
available (related) to $592,429 $345,267 ($512,114 ) $296,796 $302,658
common shareholders
Net income (loss)
available (related)
per share to common
shareholders:
Basic $1.09 $0.64 ($0.95 ) $0.55 $0.60
Diluted $1.08 $0.63 ($0.95 ) $0.54 $0.59
Weighted average
number of common
shares outstanding:
Basic 544,344,844 542,903,110 541,099,147 538,706,131 503,758,079
Diluted 550,099,709 548,551,328 541,099,147 547,882,488 512,678,975
Net income (loss) $597,054 $349,893 ($506,979 ) $302,131 $307,992
Other comprehensive
income (loss):
Unrealized gain (loss)
on available-for-sale 176,013 820,178 863,018 (232,347 ) (529,008 )
securities
Unrealized gain on 66,934 54,166 50,242 16,740 388,861
interest rate swaps
Reclassification
adjustment for (gains) (2,364 ) (5,023 ) 468 32,900 (2,830 )
losses included in net
income
Other comprehensive 240,583 869,321 913,728 (182,707 ) (142,977 )
income (loss)
Comprehensive income $837,637 $1,219,214 $406,749 $119,424 $165,015
Although the Company has the intent and ability to retain its investment in
Chimera Investment Corporation, the Company determined that it is
(1) appropriate to recognize an other-than-temporary impairment charge of $31.8
million. Recognition of such impairment charges does not reduce the taxable
income of the Company. The non-cash charge is the difference between the
purchase price for the shares and their fair value at September 30, 2008.
Beginning in the fourth quarter of 2008, the Company no longer applies
(2) hedge accounting to its interest rate swaps under SFAS 133. As a result,
changes in unrealized gains and losses in interest rate swaps are reported
in the income statement for GAAP purposes.
ANNALY CAPITAL MANAGEMENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(UNAUDITED)
(dollars in thousands, except per share data)
For the six months ended
June 30, 2009 June 30, 2008
Interest income $1,426,416 $1,564,487
Interest expense 701,221 979,857
Net interest income 725,195 584,630
Other income
Investment advisory and service fees 19,497 13,004
Gain on sale of Mortgage-Backed Securities 7,387 12,247
Income from trading securities - 4,034
Dividend income from available-for-sale equity 4,139 1,521
securities
Unrealized gain (loss) on interest rate swaps 265,752 -
Total other income 296,775 30,806
Expenses
Distribution fees 860 1,003
General and administrative expenses 59,928 51,210
Total expenses 60,788 52,213
Income before income taxes and noncontrolling 961,182 563,223
interest
Income taxes 14,235 12,137
Net income 946,947 551,086
Noncontrolling interest - 58
Net income attributable to controlling interest 946,947 551,028
Dividend on preferred stock 9,251 10,707
Net income available to common shareholders $937,696 $540,321
Net income available per share to
common shareholders:
Basic $1.72 $1.14
Diluted $1.71 $1.13
Weighted average number of common shares
outstanding:
Basic 543,627,960 473,785,256
Diluted 549,394,817 482,813,463
Net income $946,947 $551,028
Other comprehensive income (loss):
Unrealized gain (loss) on available-for-sale 996,191 (311,445 )
securities
Unrealized gain (loss) on interest rate swaps 121,100 (2,902 )
Reclassification adjustment for gains included in (7,387 ) (12,247 )
net income
Other comprehensive income (loss) 1,109,904 (326,594 )
Comprehensive income (loss) $2,056,851 $224,434
Source: Annaly Capital Management, Inc.
Contact: Annaly Capital Management, Inc.
Investor Relations
1- (888) 8Annaly
www.annaly.com